Hot Topics in Broker Risk Reduction - May 2022
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Hot Topics in Broker Risk Reduction
May 2022
Katie Johnson, General Counsel and Chief Member Experience Officer
kjohnson@nar.realtor
COMPETITION IN REAL ESTATE
a. REALTORS® help foster competition through their participation in local broker
marketplaces. These marketplaces help create highly competitive real estate
markets that are friendly to small businesses and new market entrants.
REALTORS® work together for the benefit of consumers and help ensure buyers
and sellers have the greatest access, transparency and choice in their
homeownership journeys. As a result, brokerages of all sizes are able to compete
and provide their services to consumers, who in turn have the freedom to choose
between different service models and pricing that best meet their needs.
b. Call to Action
i. Educate consumers, policymakers, media and other interested third
parties about how the local MLS broker marketplaces work, and how they
promote equity, transparency and market-driven pricing options for
consumers.
ii. Use the fact sheets, FAQs, articles, infographics and other resources on
competition.realtor to promote the value of local MLS broker marketplaces
and how they work in the best interest of consumers.
iii. Help consumers understand the value REALTORS® bring to the
transaction, how REALTORS® serve as champions in their communities
and as advocates for private property rights.
iv. Use buyer representation agreements and continue to have transparent
conversations with consumers about the negotiability of commissions and
how buyer agents get paid.
c. Resources
i. Competition.realtor: Learn the key points for members of the National
Association of REALTORS® (NAR) to know and share about how
competitive and consumer-friendly local broker marketplaces – another
name for MLSs – are, and the critical role NAR members play in advancing
consumers’ interests. Access a host of resources to facilitate conversations
with consumers and other interested third parties about the local broker
marketplaces, competition, the REALTOR® value. In addition, find the
latest developments on legal and other challenges facing the industry.CYBERCRIME
a. Cybercrime continues to be a top concern across industries, including real
estate. In 2021, the FBI Internet Crime Complaint Center (IC3) reported a
year over year increase in both the number of claims and total victim losses.
According to the FBI’s 2021 Internet Crime Report, it received nearly
850,000 complaints with an estimated total loss of $6.9 billion dollars in
2021 alone. Among the top scams facing consumers and business are:
i) phishing/vishing/smishing/pharming whereby fraudsters use unsolicited
emails, text messages and phone calls from a purportedly legitimate company
to obtain personal, financial and login credentials; ii) business email
compromise, or wire fraud, carried out by fraudsters compromising email
accounts to effectuate fraudulent fund transfers; and iii) ransomware whereby
cybercriminals install malicious software that locks users out of their systems or
encrypts data making it inaccessible unless a ransom payment is paid to the
criminals. Real estate professionals should be aware of these risks facing not only
their businesses, but also consumers, and be sure to educate staff and clients
about preventative steps they can take to prevent falling victim to cybercrime.
b. Risk Reduction Tips
i. Train staff educate to be suspicious before clicking on unknown links or
attachments.
ii. Routinely patch and update business software and equipment.
iii. Educate consumers about the threat of wire fraud and to always verify any
wire or payment instructions with a known contact before sending any
money.
iv. Use multifactor authentication and require passwords to be updated
regularly.
v. Backup data and files regularly, following the 3-2-1 backup strategy; 3
copies of the data in 2 different formats with 1 copy stored off-site.
vi. Require vendors to adhere to good cybersecurity practices, and obtain
assurances in contracts.
vii. Immediately report any suspected cyber crime incident by filing a report at
www.ic3.gov, to the local FBI office, and local law enforcement.
c. Resources
i. Mortgage Closing Scam Client Advisory Brochure
ii. Window to the Law: Protecting Your Business from a Ransomware Attack
iii. Window to the Law: Cybersecurity: What You Need to Know
iv. Cybersecurity Checklist: Best Practices for Real Estate Professionals
v. NAR Emerging Technology Series: Episode 3 – Ransomware
vi. AEI Year-Round Virtual Sessions: Cybersecurity Best Practices in the Era of
COVID-19
vii. Cyber and Fidelity Insurance Report for Real Estate Brokers
viii. NAR Data Security & Privacy Toolkit
ix. FBI Internet Crime Center: Internet Crime Report 2021
x. Directory of Local FBI Field Offices
May 2022
Page 2MULTIPLE OFFERS
a. Presenting and negotiating multiple offers brings the potential for
misunderstanding and missed opportunities. By adhering to a few
fundamental principles, real estate professionals can help both the seller and
buyer understand their options and avoid complaints and fair housing issues.
b. Risk Reduction Tips
i. Discuss the potential for multiple offers at the listing interview; explain the
available options to the seller upfront and get the seller’s instruction for
how to handle multiple offers in advance.
ii. Know your state laws regarding duties owed to clients, timeframes for
presenting offers, and what may be disclosed to the other party in a
multiple offer situation.
iii. Remember that Article 1 requires REALTORS® to promote the interest of
their client while treating all parties honestly.
iv. Keep in mind that poorly drafted buyer love letters can trigger fair
housing violations for both the real estate professional and the seller.
v. Discuss the pros and cons of escalation clauses or addendums with
buyers.
c. Resources
i. NAR’s Multiple Offer Resources
ii. Window to the Law video: How to Handle Multiple Offers
iii. NAR Professional Standards Manual, Part 4, Appendix IX – Presenting and
Negotiating Multiple Offers
iv. A Buyer’s and Seller’s Guide to Multiple Offer Negotiations
COPYRIGHT INFRINGEMENT
a. Real estate professionals must obtain permission to use a third-party work and
comply with the terms of the granted license to avoid copyright infringement. Be
sure to confirm that any rights received align with the current or planned use of
photographs or other third-party work before sharing on a website, in the MLS,
public portals, and other venues. Real estate professionals should also ensure
proper rights to any music used at live events and before incorporating into video
recordings. Keep in mind that a unique license(s) is required before music is
incorporated into a video recording. Be sure to keep records to easily confirm
rights, if needed. In addition, real estate professionals should avail themselves of
the Digital Millennium Copyright Act safe harbor, which should greatly reduce
brokers’ and agents’ risk of liability regarding third party photos and music that
appear in IDX displays.
b. Risk Reduction Tips
i. Obtain ownership or a broad exclusive license for photographs.
ii. Secure necessary licenses in order to play music at a live event or
incorporate music into a listing video.
May 2022
Page 3iii. Be sure to understand the rights granted in license agreements and
consider any future use of copyrighted material when securing the
license.
iv. Comply with the Digital Millennium Copyright Act safe harbor.
v. Keep records of license agreements to easily confirm rights, if challenged.
c. Resources
i. Listing Photo Sample Agreements
ii. NAR Risk Management Webinar Series: Copyright: Best Practices to Avoid
Costly Claims
iii. Window to the Law: Copyright Best Practices for Listing Photos
iv. Window to the Law: Copyright Infringement Safe Harbor
v. Window to the Law: How to Avoid Copyright Infringement
vi. NAR Article: “Who Owns Your Property Photos?”
vii. Make NAR’s Marks Remarkable & Quick Copyright Best Practices
FAIR HOUSING
a. Fair housing laws prohibit a refusal to rent or sell real property based on a
protected characteristic. Steering, blockbusting, and refusing to provide
equal services to all clients are obvious fair housing violations, but liability
may also arise when a policy or action disproportionately harms a
protected class. A 2019 investigation on Long Island published by Newsday
revealed that 49% of Black testers, along with 39% of Hispanic and 19% of
Asian testers, were not provided equal services. It’s imperative that all real
estate professionals incorporate fair housing compliance and implicit bias
training into their strategic plans.
b. Risk Reduction Tips
i. Implement an Equal Services Report and Checklist for all customer
interactions.
ii. Ensure any prerequisites are consistent and objective.
iii. Focus on objective characteristics of the property and avoid giving
personal opinions about a neighborhood or community.
iv. Warn of fair housing concerns related to poorly drafted letters buyer
love letters, and avoid reviewing or delivering them should clients insist
on using them.
v. Incorporate regular implicit bias and fair housing compliance into your
ongoing training plans.
c. Resources
i. NAR’s Fair Housing Resource site
ii. Real Estate Brokerage Essentials: Chapter on Fair Housing with training
materials
iii. NAR Video: Implicit Bias Override
iv. At Home with Diversity Certification
May 2022
Page 4v. A Snapshot of Race and Homebuying in America
vi. REALTOR® Fair Housing Declaration
vii. The Color of Law: A Forgotten History of How Our Government Segregated
America, by Richard Rothstein (2017)
viii. Fair Housing social media assets available via Photofy
ix. Fairhaven: A Fair Housing Simulation
x. Window to the Law: Advertising within the Fair Housing Framework
xi. Window to the Law: Criminal Background Checks and Fair Housing
xii. Window to the Law Video: Creating a Diversity, Equity & Inclusion Policy
xiii. Window to the Law Video: NAR’s Fair Housing Action Plan
xiv. Window to the Law: Fair Housing Update
ADA WEBSITE ACCESSIBILITY
a. Americans with Disabilities Act (ADA) website accessibility claims continue to
grow, with a reported 14% increase in federal lawsuits filed in 2021 as compared to
2020. Additionally, the real estate industry has continued to see a wave of
demand letters alleging a business website’s inaccessibility in violation of the
ADA and unsupported claims that it also violates the Fair Housing Act (FHA).
Businesses continue to wait for the Department of Justice to issue regulations
addressing this issue. In the meantime, in March 2022, the DOJ issued website
accessibility guidance and a new webpage with information about website
accessibility. In the guidance, the DOJ provided information on how businesses
can use existing standards to make their websites accessible to people with
disabilities. Real estate professionals should continue to work with website
vendors to conduct accessibility audits of their websites and use existing
technical standards, such as the Web Content Accessibility Guidelines, to
ensure accessibility of a website’s features. NAR will continue to advocate for
regulations with clear standards that take into consideration the challenges
that businesses face in developing and maintaining accessible websites.
b. Risk Reduction Tips
i. Assess your website’s current accessibility and create a plan to address and
enhance any accessibility issues.
ii. Ask your website provider how they are addressing your site’s accessibility
and be sure to address ADA website accessibility and indemnification
issues in your contract with the provider.
iii. Consult a website accessibility expert to create a plan for addressing
website accessibility issues.
iv. Include an accessibility statement on your website, along with contact info
where individuals with disabilities may report difficulty accessing the
website and can seek additional assistance accessing information or
services. Feel free to copy NAR’s accessibility statement on its website.
May 2022
Page 5c. Resources:
i. REALTOR® Magazine: “ADA Demand Letters: A Vexing Reality for Real
Estate Pros”
ii. REALTOR® Magazine: “Is Your Website ADA Compliant?”
iii. Window to the Law: ADA and Website Accessibility Update
iv. Window to the Law: Accessible Websites and the ADA
v. Department of Justice March 18, 2022: Guidance on Web Accessibility
and the ADA
TCPA & DNC: TEXTING AND CALLING
a. Plaintiff lawyers have created a lucrative business model filing class action
lawsuits alleging real estate professionals have violated the Telephone
Consumer Protection Act (TCPA) and Do Not Call (DNC) laws by sending
text messages and placing phone calls without the recipient’s consent.
Specifically, the TCPA requires prior express written consent before using
an automatic telephone dialing system (ATDS) to place telemarketing calls
or texts to wireless numbers.
On April 1, 2021, the United States Supreme Court issued its long-awaited
opinion in Facebook v. Duguid, unanimously overturning the Ninth Circuit
Court of Appeals and narrowly defining the TCPA’s ATDS definition. In
order to trigger the TCPA’s ATDS consent requirements, the call
technology must not only store or dial numbers, it must actually use a
random or sequential number generator to place the calls. Thus, calls
using random or sequential number generators still require prior express
written consent, which involves a signed agreement clearly and
conspicuously disclosing the text recipient’s permission to receive call and
text messages from the sender. Now it is clear that calls generated
individually - not using a random or sequential number generator - need
not obtain prior consent at all, even if the device has the ability to store and
dial call lists. Keep in mind that DNC laws should always be followed, which
prohibits individuals from contacting phone numbers contained in the
DNC registry.
b. Follow these tips to reduce risk of violating the TCPA
i. Consent is the gold standard to avoid TCPA liability and must obtained
when using technology that employs a random or sequential number
generator. Consent should be clearly stated, well documented and
preserved.
ii. Include language on consent forms stating that recipients who submit
wireless numbers agree to receive calls and text messages from or on
behalf of the sender.
iii. Allow recipients to easily cancel or opt-out (e.g., by responding “STOP” or
“UNSUBSCRIBE”).
May 2022
Page 6iv. Promptly remove individuals from messaging lists who have opted out,
and be sure to record the date the person opted-out, along with the date
the person was removed.
v. Talk to your vendors about TCPA and DNC compliance and
indemnification.
c. Follow these tips to reduce risk of violating the DNC
i. Create an office policy for compliance with DNC rules, and implement a
method to monitor compliance.
ii. Obtain an updated DNC list monthly and cross reference with your
company customer relationship management platform.
d. Resources:
i. NAR Telemarketing & Cold-Calling Topic Page
ii. TCPA Quick Reference Guide
iii. REALTOR® Magazine: “Do You Know Who You Are Calling?”
iv. National Do Not Call Registry
v. Window to the Law: Comply with The Do Not Call Registry
vi. Window to the Law: TCPA and Texting
vii. Window to the Law: TCPA Update on Cell Phone Marketing
CLEAR COOPERATION POLICY LITIGATION
a. Top Agent Network v. National Association of REALTORS®, California
Association of REALTORS®, and San Francisco Association of REALTORS®,
Case No. 3:20-cv-03198 (N.D. Cal., 2020), filed May 11, 2020.
b. The PLS.com, LLC v. National Association of REALTORS®, CRMLS, MRED, and
Bright MLS, Case No. 2:20-cv-04790 (C.D. Cal., 2020), filed May 28, 2020.
Plaintiffs in both cases allege that NAR’s Clear Cooperation Policy is anticompetitive.
The Clear Cooperation Policy was passed by the NAR Board of Directors in
November, 2019, and reinforces transparency and competition between real estate
listings and between brokers as pro-consumer benefits of the MLS. The policy
requires listing brokers who are participants in a multiple listing service to submit
their listing to the MLS within one business day of marketing the property to the
public.
Importantly, the policy only applies to listings that are publicly marketed and has no
impact on properties that are sold exclusively within a brokerage. When a property is
submitted into the MLS, the seller and the broker have concluded cooperation with
other MLS participants is in the seller’s best interests and enables the listing to be
shared with the widest group of potential buyers, which increases the chance for the
best offer. This benefits both sellers and buyers and promotes equal opportunity for
all.
May 2022
Page 7The Clear Cooperation Policy is still in effect and is not altered in any way by these
lawsuits.
c. Resources
i. MLS Clear Cooperation Policy Resources
ii. Window to the Law: Understanding the MLS Clear Cooperation Policy
CLASS ACTION ANTITRUST LITIGATION
a. Moehrl v. The National Association of REALTORS®, Realogy Holdings Corp.,
HomeServices of America, Inc., RE/MAX Holdings, Inc., and Keller Williams
Realty, Inc. (U.S. Dist. Ct. N.D. Ill., Case No. 1:19-cv-01610), filed March 6, 2019
(consolidated with Sawbill Strategic, Inc. v. The National Association of
REALTORS®, HomeServices of America, Inc., Keller Williams Realty, Inc.,
Realogy Holdings Corp., and RE/MAX Holdings, Inc. (U.S. Dist. Ct. N.D. Ill.,
Case No. 1:19-cv-02544), filed April 15, 2019).
b. Sitzer and Winger v. NAR et al. (U.S. Dist. Ct. W.D. Mo., Case No.
4:19-cv-00332), filed April 29, 2019.
Plaintiffs filed a putative class action lawsuit against NAR and four real estate
corporations alleging home sellers unfairly pay the commissions of buyers’ brokers.
The complaints mischaracterize NAR rules and MLS policy, and question the value
buyers’ brokers deliver in the home buying and selling process. NAR intends to
demonstrate to the courts how the MLS system creates competitive, efficient
markets that benefit home buyers and sellers as well as small business brokerages,
and that buyers’ brokers play a very real and critical role in the home buying and
selling process.
c. Leeder v. The National Association of REALTORS®, Realogy Holdings Corp.,
HomeServices of America, Inc., BHH Affiliates, LLC, The Long & Foster
Companies, Inc., RE/MAX LLC, and Keller Williams Realty, Inc. (U.S. Dist. Ct.
N.D. Ill., Case No. 1:21-cv-00430), filed January 25, 2021.
Plaintiff filed a putative class action lawsuit against NAR, and several corporate
defendants. The purported class consists of home buyers who mischaracterize NAR’s
rules by alleging that defendants promulgated and enforced anticompetitive rules
that caused home buyers to pay inflated commissions for broker services they
misrepresent are free, to pay inflated prices for the homes they purchase, and to
receive reduced quality broker services.
Resources
i. Competition.realtor
ii. REALTOR® Magazine: “Lawsuit Against NAR is Baseless”
May 2022
Page 8DOJ ACTION
National Association of REALTORS® v. United States of America et al. (U.S. Dist.
Ct. D.C., No. 1:21-cv-2406), filed September 13, 2021.
In September 2021, NAR filed a petition to quash a request by the Department of
Justice to reopen its investigation into the MLS system, which was resolved by the
fully negotiated and approved November 2020 settlement announced by the DOJ
and NAR. The DOJ’s attempt to withdraw from the settlement is unprecedented,
and a breach of both the agreement and the law. NAR filed this action to simply
require the DOJ to live up to the terms of the agreement, which NAR had already
begun implementing. That agreement included a requirement that NAR adopt the
following four rule changes to more explicitly state what is already in the spirit and
intent of NAR’s Code of Ethics and MLS policies:
1) The offer of compensation must be disclosed;
2) Real estate transaction services must not be advertised as free;
3) MLS listings may not be filtered based on commission amount or name of the
listing broker or agent;
4) Lockbox access must be available to all licensed real estate professionals.
While the settlement is currently on hold, NAR is always committed to acting in the
best interest of buyers and sellers across the country and updates its’ polices to
protect consumers and promote transparency and efficiency in the real estate
marketplace. Therefore, NAR’s MLS Committee approved adoption of certain of
these rule changes at its November 2021 meeting.
Resources
i. Competition.realtor
ii. National Association of REALTORS® Files Petition to Oppose Department of
Justice Breach of Settlement Agreement
iii. Code Comprehension: Article 3 – Ethical Duty to Cooperate
Go to the REALTOR® Store to get a copy of Real Estate Brokerage Essentials®, a
comprehensive tool to help brokerages navigate important issues while
minimizing legal risk.
May 2022
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